Manchester Mortgages contacted one of their existing mortgage clients to review their mortgage and existing credit commitments.
The clients were both in their late 20’s, married with no children, employed as Teachers with a joint income of £65,000 per year.
Their property was in Didsbury and was worth £205,000 with an existing repayment mortgage with Virgin Money which had £165,000 outstanding with 33 years remaining – their existing fixed rate of 3.94% which Manchester Mortgages had originally arranged was due to expire in a couple of months and they were paying mortgage payments of £710 per month.
They had purchased their property two years ago and had utilised their credit cards to pay for home improvements including a new kitchen & bathroom, up graded the electrics and decoration – their credit card balances now stood at £18,000 which were costing £500 per month in payments.
Including the mortgage the cost for all of the above was £1,210 per month and in total they owed £183,000.
Clients were looking to reduce their outgoings to around £700 per month.
All payments were up to date with no payments missed.
The credit card balances were not reducing as the payments mainly covered interest with very little capital repayment.
Clients were left in a position every month of seeing their monthly salary credited to their bank account only to see it go out as the above payments went out along with daily living expenses.
The credit card balances left the client feeling that they were working just to pay the credit card bills and meant that they could not afford to finish the jobs they wanted to on the house.
A new unsecured personal loan would only be repayable over a maximum 7 year period which meant that any new loan payments was outside clients budget.
Clients wanted to repay all the above debt and consolidate it to one payment so they could then see what was left in their bank account each month and budget accordingly.
Clients wished to keep their mortgage over the remaining term of 33 years.
As Manchester Mortgages are a whole of market / independent broker we were able to research the mortgage market and recommended that clients re-mortgaged to a new lender and increase their mortgage to £183,000 which included repaying existing mortgage and all their existing credit card balances.
After fully discussing clients requirements Manchester Mortgages recommended a 2 year fixed rate at 2.66% with Accord Mortgages over 33 years which reduced the mortgage payments to £694 per month – a whooping reduction of outgoings of £516 per month.
The lender offered a free standard valuation and free legal fees via their nominated solicitor along with no arrangement fees.
Therefore clients now have only one payment per month and do not have to worry about credit card payments and know exactly where they are up to with their finances – Manchester Mortgages also reviewed their clients mortgage protection and income protection and clients took our advice and upgraded their cover which was easily afforded due to the above monthly savings.
Clients were made fully aware of the implications of transferring short term loans to long term commitments and although they were reducing their immediate outgoings over the existing mortgage term, in the longer term the total charge for credit was likely to be higher.
In addition by transferring unsecured borrowing ( credit cards ) on to a secured basis they were potentially placing their home at a greater risk in the event of mortgage payments not being maintained for the term of the mortgage.
With their mortgage payments reduced clients are seeing the benefit of their £516 per month savings and are now enjoying completing their final odd jobs around the house.
If you have an existing mortgage and outstanding loans or credit card balances or wish to improve your property give MANCHESTER MORTGAGES a call on 0161 706 0242 to see if we can make a difference to your mortgage payments.